T-Mobile US to allow phone upgrades every six months

T-Mobile US Inc said on Wednesday that customers would be allowed to upgrade phones every six months and it unveiled a family plan for prepaid customers.

T-Mobile Chief Executive John Legere speaks during a company event in New York July 10, 2013. REUTERS/Brendan McDermid

T-Mobile US Inc said on Wednesday that customers would be allowed to upgrade phones every six months and it unveiled a family plan for prepaid customers as it moves to lure customers away from its three bigger rivals.

Verizon Wireless, AT&T Inc and Sprint Nextel Corp offer phone discounts in exchange for tying customers to two year contracts and typically do not allow phone upgrades during that period.

T-Mobile, which is under pressure to stem years of customer losses, is betting people will switch to its service because they want to change phones more often than its rivals allow.

"You can upgrade when you want, not when you're told," T-Mobile Chief Executive John Legere, who was appointed in September 2012, said in a dig at his bigger rivals at a New York event where he announced the move.

The No. 4 U.S. mobile provider also hopes to attract more customers who pay for calls in advance by offering a prepaid family plan that does not require a credit check.

It said its $100 monthly fee for a family of four is about $100 less than AT&T's service, saying about a third of U.S. families would not pass the credit checks required for typical wireless family plans.

AT&T and Verizon attribute much of their success in retaining customers to family plans because it is harder for an entire family to change service than an individual.

Customers who want frequent phone upgrades must sign on to a service called Jump that requires them to pay a $10 monthly insurance fee on top of monthly service fees and a one-off down payment that partially covers the cost of the phone. They are also charged a monthly fee of up to $20 per month to pay for the remainder of the phone.

When T-Mobile customers want an upgrade, they can bring a phone to a store and swap it for a new device. They pay another down-payment and resume monthly payments for that device. The moves follows T-Mobile's elimination in March of long-term contracts and handset subsidies.

The event on Wednesday was T-Mobiles' first media function since it merged with MetroPCS in April.

It also announced that customer defection rates are lower than ever because of new marketing efforts and the introduction in April of the Apple Inc iPhone, which accounted for 29 percent of its smartphone sales in the second quarter.

T-Mobile shares closed 1.3 percent higher at $24.42 on the New York Stock Exchange.